Although many financial planning companies rely on the relationship between the financial planner and the customer, E-Trade’s customers primarily conduct business online – usually without communicating directly with any of the company’s financial planners.
Even so, the company includes a non-solicitation agreement as part of their employment contract with their financial consultants and brokers. According to a recent employment lawsuit, Heather Pospisil, a former financial consultant for E-Trade, allegedly violated that agreement by taking E-Trade clients with her when she moved to Morgan Stanley.
According to the lawsuit, Pospisil allegedly accessed a considerable amount of client information late one night, just a few days before she left to join Morgan Stanley, another financial planning company that competes directly with E-Trade.
Pospisil alleges she was merely accessing the information so she could let clients know she was leaving the company. Not only would those clients be unlikely to care, given the online nature of E-Trade’s business, but U.S. Judge Ronald A. Guzman pointed out that it would have been much faster to send a mass email to all her clients. In addition to being more efficient, it also would have provided evidence to support her claim that all she did was provide notice of her departure.
Judge Guzman also noticed that the number of files she accessed on that night accounted for 75% of all the files she had ever accessed in the more than four-and-a-half years she had been working for E-Trade.
He also pointed to the evidence that one of the clients Pospisil contacted had attended a Chicago Cubs baseball game with her not long before she left to work for Morgan Stanley – a move that looks suspiciously like an attempt at recruitment.
Only four of E-Trade’s clients moved to Morgan Stanley when Pospisil did, but those four accounts were worth approximately $4.4 million when combined.
In addition to allegedly taking highly valuable accounts away from E-Trade, Pospisil also may have done irreparable damage to its reputation. As a financial planning and consulting company that operates primarily online, it has built its reputation as a company that protects the privacy of its clients and limits access to their information. Its non-disclosure and non-solicitation agreements are both important parts of maintaining that promise to its clients, which means Pospisil jeopardized more than just E-Trade’s relationship with the four accounts she allegedly took with her when she moved to Morgan Stanley.
Pospisil provided statements from her clients saying she did not solicit them to make the move to Morgan Stanley with her. Judge Guzman was not impressed, seeing that the statements were not only unsworn, but that they contained boilerplate language that merely stated that Pospisil had not solicited them to switch their accounts to Morgan Stanley, and that they did not contain any information as to how and why Pospisil did contact them.
As a result, Judge Guzman issued an injunction against Pospisil contacting any more E-Trade clients who have not already indicated a desire to switch their accounts from E-Trade to Morgan Stanley. He also ordered her to return all confidential information on E-Trade’s clients to E-Trade and preserve all the data stored on all her phones, computers, and any other data-storage equipment she may have used.
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